By Canadian Press

China sees free trade with Canada as way to avoid future Norsat-like uncertainty

Jul 5, 2017 | 1:45 AM

OTTAWA — China is hoping a future free-trade deal with Canada will help it avoid future controversies such as the national security concerns that surfaced over a Chinese takeover of a Canadian satellite technology company.

Lu Shaye, China’s ambassador to Canada, said in an interview that he believes a free-trade agreement would help alleviate some of the unknowns for Chinese investors in future deals like the contentious takeover of Norsat International Inc.

Public unease and political criticism erupted after the Trudeau government allowed the takeover of Norsat by Chinese-based Hytera Communications Co. Ltd. without a full national security review. Vancouver-based Norsat makes radio systems and transceivers used by the American military and other NATO partners.

Lu pointed to free trade as a way to avoid similar waves of uncertainty down the road for Chinese investors, whom he said have since become more prudent.

“This case has stirred up quite a big reaction in Canadian society,” he told The Canadian Press through an interpreter in an interview at the Chinese embassy in Ottawa.

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“The signing of the (free-trade agreement) is to provide a stable and anticipated institutional arrangement for mutual investment, so that investors won’t worry (that) their investments may encounter some difficulties or problems.”

Prime Minister Justin Trudeau has sought to assuage fears about the Norsat takeover, insisting Canada’s security agencies consulted fully with important allies, including the United States. 

He said an initial government review of the takeover, required under the Investment Canada Act, found “no significant national security concerns” and that the agencies involved recommended the deal be allowed to proceed.

Opposition MPs have repeatedly raised security concerns about the deal.

The takeover also fostered unease in the U.S. Congress about allowing the Chinese firm access to sensitive defence technology. Because of the deal, the U.S. Department of Defense has said it is reviewing its business dealings with Norsat.

Norsat (TSX:NII) makes satellite communications systems used for national security and defence purposes. It has a number of government customers in Canada and internationally, including the Pentagon.

The issue could find its way into trade discussions between Canada and China. 

A third round of exploratory trade talks is scheduled to start this month and Lu hopes formal negotiations will follow at an “early date,” Lu said.

However, the spokesman for International Trade Minister Francois-Philippe Champagne said the government is still waiting on the results of its public consultations with Canadians.

If the exploratory talks lead the government to conclude that formal negotiations should take place, Ottawa might launch another round of consultations, said spokesman Joseph Pickerill.

Overall, Lu insisted Canada’s far smaller market stands to benefit much more from any deal than China, which is the world’s second-largest economy.

“We are also not in a rush — it is totally up to the Canadian side,” Lu said, offering a reminder Canada is home to 36 million people while China is home to 1.3 billion.

“The earlier the Canadian side signs the FTA, the earlier you get the benefits.”

When asked what makes a bilateral pact attractive for China, Lu declined to discuss specifics because exploratory talks had already begun.

He did say China would like to open the markets up a little more and facilitate mutual investment.

But Lu insisted there are few enticing opportunities for Chinese investors in Canada, aside from advanced technologies and products.

And even those types of investments are at risk of gradually losing their appeal, he warned.

“If the Chinese investors encounter more obstacles, they would lose their interest and in a few years those technologies and products won’t be that advanced.”

The Trudeau government has been proactive in trying to develop closer ties with China and in pursuing a bilateral trade deal. However, a full-fledged trade pact is likely years away.

Ottawa has said human rights and labour standards will be part of any trade agreement with China.

China, however, doesn’t think issues like human rights and democracy belong in an economic deal.

“I have stated many times that we’re not afraid of discussing the issues, such as democracy and human rights,” he said. “FTA is FTA itself — we just don’t want to add too many non-economic or non-trade factors into it.”

Lu added that he believes the Liberal government is only asking for these issues to be included in a trade deal because of pressure from the “influential” Canadian media. He also blamed the Canadian news outlets for painting a ill-informed, negative portrait of his country that depicts it as an abuser of human rights and lacking democracy.

While many Canadian business executives favour the idea of free trade with China, political rivals like Conservative Leader Andrew Scheer oppose it.

Scheer told CTV last month that Canada would continue to have a “dynamic” trading relationship with China under a Tory government.

But he argued a free-trade deal would put Canadian manufacturers and workers at a disadvantage because China has different standards in areas like the environment and labour.

On the Norsat deal, Scheer warned it threatens Canadian security and it risks alienating the country’s U.S. ally.

“And what I’m worried about,” he said, “is that these are steps that the Liberals are doing to appease the Chinese government before free-trade negotiations even start.”

Andy Blatchford and Mike Blanchfield, The Canadian Press